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Despite having to contend with local and international challenges, Senegal has ended 2009 on a good note, with the economy expanding and groundwork being laid for growth in the coming year.

While the global financial crisis has had an impact on the economy, the country is expected to close out the year having recorded positive growth, with GDP forecast to expand by around 1.25%. Though this is half the growth rate of 2008, any expansion at all is impressive considering the financial environment.

This is even more the case given the domestic problems that had to be overcome in 2009. There were widespread cuts to electricity supplies in August and September, while severe flooding in Dakar and surrounding districts in August temporarily displaced up to 200,000 people and disrupted businesses. These difficulties were among the reasons for the IMF tempering its prediction, made in the first half of the year, that Senegal’s GDP would increase by 1.5% in 2009. In its latest report, issued in mid-November, the IMF said Senegal’s economy should gain momentum in 2010, with GDP to expand by 3.5%, thanks to what the fund said was the satisfactory “implementation of the government’s economic and financial programme in a difficult economic environment”.

Another step in that financial programme came late in the year, when Senegal moved to break new ground in global capital markets. In early December the government announced it was looking to raise up to $200m through the country’s first-ever international dollar bond sale. Media reports suggest that the yield guidance for the bond, which is to have a five-year term, has been set at around 8.75%. According to François Ekam-Dick, the managing director of Iroko Securities, a London-based securities firm that focuses on the African market, if the Senegal issue was well received, it could serve as a benchmark for other sub-Saharan countries, prompting a ramping up of bond activity.

“Senegal’s deal will be closely watched for how international investors respond to a deal from sub-Saharan Africa,” he told Reuters on December 10. “From a diversification strategy, Senegal’s bond looks like a good deal.”

Officials have said that the funds raised through the bond issue will be used to help finance the construction of a 31-km toll road linking Dakar and Diamniadio. The project, which has gained support from the World Bank through a $105m loan, has been budgeted at $531m and is part of the government’s efforts to improve the country’s overall infrastructure.

These efforts have extended to overcoming the chronic electricity shortages that are hampering economic growth. In July, Prime Minister Souleymane Ndene Ndiaye unveiled plans for large-scale investment in the energy sector, with more than $1.1bn to be spent by 2012. Among the projects outlined by the prime minister was a coal-fired power station, the first stage of which would come into service in 2010, with the second stage becoming operational the following year.

With its power generation capacity heavily dependant on imports, Senegal has benefitted from the fall in oil prices from their peak in mid-2008, though the steady upward movement has again eaten into the state budget as the year progressed. While not an oil producer, Senegal does have a refinery for petroleum products, which meets most of the country’s needs. However, a proposal floated by the Nigerian government could see Senegal become a net exporter of refined products, adding a significant string to its economic bow.

In early November, Nigeria’s minister of state for petroleum resources, Odein Ajumogobia, proposed that his country send crude oil to Senegal to be processed and then exported back for use in the Nigerian domestic market. The plan could dovetail with a scheme to increase the capacity of the Senegalese refinery, which currently has an optimal output of 1m tonnes annually.

In June, Senegal’s economy received another boost as the country joined the ranks of Africa’s gold producers. President Abdoulaye Wade attended a ceremony in the south-eastern Kedougou region to formally inaugurate a mine that is a joint venture between Australian-based Mineral Deposits Limited (MDL) and the government. MDL is just one of more than half a dozen international mining firms either already on the ground in Senegal or seeking licences to exploit identified fields or search for new deposits. Combined with existing phosphate mining operations, and efforts to boost output of its iron ore mines from 15m to 25m tonnes annually by 2011, the country is moving towards making better use of its mineral resources.

However, some of the gloss on the minerals sector was dulled in July, when Arcelor Mittal, the world’s largest steel company, announced it was suspending work on developing a $2.2bn iron ore project in the country’s south-east due to the global economic downturn and the fall in demand for steel. Though the decision is not final – Arcelor Mittal is talking about deferring the project rather than scrapping it – even a delay will affect the economy, with the scheme promising riches such as a major port and rail link.

Having apparently weathered the worst of the global recession and still managing to post positive growth, Senegal can look forward to a better 2010, as demand for exports is expected to rise and some of the investments made in the economy this year start to bear fruit.